[20.11.2ÎÎ3] Integration - the Most Difficult Challenge for the Region

…All the countries of Central Asia are still at relatively early stages in a significant transition process towards generally market economies, that necessitates policy adjustments at all levels.

Q: Will the ADB push the countries of Central Asia towards deeper cooperation?

A: We very strongly hope this will happen. Because of the region's geographic isolation, the relatively small size of all the economies and the high degree of competition elsewhere in the global economy, it is absolutely imperative for the future of the region to achieve deeper cooperation and economic and commercial integration within the region. That is the ADB's view and fundamentally that is the reason why we have been engaged so deeply in this process. Achieving that kind of integration is not going to be easy. For instance, the experience in Europe, for example. This is a thirty-year process. But from our point of view, the overwhelming story seems to me that it is not a difficult process. Prosperity has been produced by greater stability and regional integration. This is therefore a priority for the ADB in Central Asia. On one of the more fundamental questions, where are things going, I would say a couple of things. First, the ADB, like other institutions, has clearly and consistently expressed its concern about the very significant poverty problem in Central Asia. The transition process has been difficult here. The shock from the initial transition has clearly not been overcome. Substantial public problems remain in all of these countries. The data is reasonably clear on this basic point: there has been deterioration in living standards and that is a matter of considerable concern. The ADB's primary objective is poverty reduction…People need more equitable opportunities to participate in the broader growth of the economy. Specifically, we are concerned with the issue of trade… President Chino has made the point that deeper and more meaningful regional cooperation and integration is not an option for Central Asia, it is a necessity. That goes for small scale trade, the so-called shuttle trade, as well as trade in services like energy and, crucially, for resources like water. All this is part of the same package, and it is not something that any country can achieve on its own. There are hopes that the ADB will stimulate this process, identifying issues where we can make a contribution and encourage local trade.

Q: What is the ADB's strategy in overcoming the existing bureaucratic barriers between the Central Asian countries?

A: In some ways countries everywhere are very similar, there are bureaucratic barriers everywhere.

This is one of the reasons why the ADB is so interested in things like cross-border roads. We are building one from Bishkek to Almaty. When we make a specific investment, it gives us the opportunity to go into details, and see more precisely where the policy barriers or bureaucratic barriers are. We then work with both governments to reduce them. For their part, they have an incentive to do so because this can be quite a substantial investment.

Q: Does the ADB control loans it has granted for certain projects?

A: Yes, very much so! The ADB is a multilateral institution. It has shareholders, a board and governance structures. The board of directors insists that we have appropriate fiduciary controls and that our design process is consistent with basic policies. We will not finance projects that do not meet ADB policies, for example with respect to thorough environmental analysis or if we are doing a project that will displace people…The countries that agree to take the loan at the same time agree to observe our policies and we carry out regular supervisory missions.

Q: Which country needs the most help in Central Asia?

A: That's a difficult question because there are many common problems and many differences between those countries. Each country could benefit from international assistance, but in different ways. In the case of all of the countries, we believe that there is both a need for and an opportunity for a variety of things that will help build more robust market economies. In some places, it takes the form of investing in a road to encourage commerce. In other places it is in the primary education to create a new generation of citizens with the capacity to compete in the world economy. In some places we can make a difference by moving ahead with financial sector reforms, so there is an adequate supply of credit to small and medium sized businesses…

Q: What is, in your opinion, the most difficult and topical problem in Central Asia that must be solved first of all?

A: The issue of mutual integration is the most difficult challenge for the countries of the region. The countries themselves need to see that it is very clearly in their shared interest to deepen their connections, deepen their collaboration, and to be willing to exercise the political will to make some difficult policy choices that must be made if deeper integration is to be a reality. That means addressing very sensitive issues like regional power and water arrangements, and the movement of people, and none of that will happen on its own. It will have to be encouraged and supported by political choices of all the governments, and part of our role here is to do what we can to encourage that sort of choice.